Constantino v. Asia Life- Non-payment of Insurance Premiums 87 PHIL 248 Facts: > Appeal consolidates two cases.

> Asia life insurance Company (ALIC) was incorporated in Delaware. > For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary.
y

First premium covered the period up to Sept. 26, 1942. No further premiums were paid after the first premium and Arcadio died on Sept. 22, 1944.

> Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 19421945. > On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20 years. The annual premium stipulated was regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940.
y y y

Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such quarterly premiums were paid until Nov. 18, 1941. Last payment covered the period until Jan. 31, 1942. Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.

> Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside from this the insured borrowed from the policy P234.00 such that the cash surrender value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942. > Both policies contained this provision: All premiums are due in advance and any unpunctuality in making such payment shall cause this policy to lapse unless and except as kept in force by the grace period condition. > Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the proceeds of the policies less all sums due for premiums in arrears. They also allege that non-payment of the premiums were caused by the closing of ALICs offices during the war and the impossible circumstances by the war, therefore, they should be excused and the policies should not be forfeited. > Lower court ruled in favor of ALIC.

Issue: May a beneficiary in a life insurance policy recover the amount thereof although the insured died after repeatedly failing to pay the stipulated premiums, such failure being caused by war? Held: NO. Due to the express terms of the policy, non-payment of the premium produces its avoidance. In Glaraga v. Sun Life, it was held that a life policy was avoided because the premium had not been paid within the time fixed; since by its express terms, nonpayment of any premium when due or within the 31 day grace period ipso fact caused the policy to lapse. When the life insurance policy provides that non-payment of premiums will cause its forfeiture, war does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why punctual payments are important is that the insurer calculates on the basis of the prompt payments. Otherwise, malulugi sila. It should be noted that the parties contracted not only as to peace time conditions but also as to war-time conditions since the policies contained provisions applicable expressly to wartime days. The logical inference therefore is that the parties contemplated the uninterrupted operation of the contract even if armed conflict should ensue.

Enriquez vs. Sun Life Assurance Company of Canada [GR 15895, 29 November 1920] Facts: On 24 September 1917, Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt. The application was immediately forwarded to the head office of the company at Montreal, Canada. On 26 November 1917, the head office gave notice of acceptance by cable to Manila. (Whether on the same day the cable was received notice was sent by the Manila office to Herrer that the application had been accepted, is a disputed point.) On 4 December 1917, the policy was issued at Montreal. On 18 December 1917, attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of 26 November 1917. This letter was received by Mr. Torres on the morning of 21 December 1917. Mr. Herrer died on 20 December 1917. An action was brought by Rafaek Enriquez as administrator of the estate of the late Joaquin Ma. Herrer to recover from Sun Life Assurance Company of Canada the sum of P6,000 paid by the deceased for a life annuity. The trial court gave judgment for Sun Life. Enriquez appealed. Issue: Whether Herrer received notice of acceptance of his application, to hold that the contract for a life annuity was perfected. Held: NO. The letter of 26 November 1917, notifying Mr. Ferrer that his application had been accepted, was prepared and signed in the local office of the insurance company, was placed in the ordinary channels for transmission, but was never actually mailed and thus was never received by the applicant. The Civil Code rule, that an acceptance made by letter shall bind the person making the offer only from the date it came to his knowledge, may not be the best expression of modern commercial usage. Still it must be admitted that its enforcement avoids uncertainty and tends to security. Not only this, but in order that the principle may not be taken too lightly, it is identical with the principles announced by a considerable number of respectable, courts in the United States. The courts who take this view have expressly held that an acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract. Only the mailing of acceptance, it has been said, completes the contract of insurance, as the locus poienitentise is ended when the acceptance has passed beyond the control of the party. In resume, therefore, the law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. The pertinent fact is, that according to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval of the application by the

head office of the company; and (3) this approval had in some way to be communicated by the company to the applicant. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter of notification and place it in the usual channels for transmission to the addressee. The fact as to the letter of notification thus fails to concur with the essential elements of the general rule pertaining to the mailing and delivery of mail matter as announced by the American courts, namely, when a letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not be presumed to have been received by the addressee unless it is shown that it was deposited in the post-office, properly addressed and stamped. The contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.

Fortune Insurance and Surety Co. Inc. v. Court of Appeals No. 115278, May 23, 1995 Facts: Producers Bank of the Philippines was insured by the Fortune Insurance and Surety Co. Inc. On June 29, 1987, an armored car of Producers was robbed while travelling along Taft Avenue, to transfer case in the sum of Php 725,000 from its Pasay Branch to the Head Office. The said armored car was driven by Benjamin Magalong and escorted by security guard Satunino Atiga. Magalong was assigned by PRC Management Systems while Atiga was assigned by Unicorn Security Services. After an investigation, Magalong and Atiga were charged, together with 3 others, for violation of the Anti-Highway Robbery Law. During the pendency of the criminal case, demands were made by Producers upon Fortune to pay the amount of the loss from the robbery, but the latter refused stating that the loss is excluded from the insurance policy as provided in General Exceptions, section (b) of the policy that any loss caused by the any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the insured whether acting alone on in conjunction with others... producers opposed such contention stating that Atiga and Magalong are not included in those enumerated in the above-stated provision and thereafter, filed a complaint against the insurance company. The trial court rendered a decision in favor of the bank which the Court of Appeals affirmed when Fortune appealed such decision. Issue: Whether or not recovery by Producers is precluded under the general exception clause of the policy. Ruling: It has been aptly observed that in burglary, robbery and theft insurance, the opportunity to defraud the insurer the moral hazard is so great the insurers have found it necessary to fill up their policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer assume the risk of all losses due to the hazards insured against. Persons frequently excluded under such provisions are those in the insured s service and employment. In such cases, the terms specifying the excluded classes are to be given their meaning as understood in common speech. The terms service and employment are generally associated with the idea of selection, control and compensation. Insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and coverage losses arising from dishonest, fraudulent or criminal acts of persons granted or having unrestricted access to Producers money or payroll. When it used then the term employee, it must have had in mind any person who qualifies as such and generally and universally understood or jurisprudentially established in the light of the four standards in the determination of the employer-employee relationship. With these view, Producers, having entrusted the three the specific duty to safely transfer the money to it head office, has acted as agents of which it can be considered as representative of the company

Fortune Insurance and Surety Co. Inc. vs. Court of Appeals [GR 115278, 23 May 1995] Facts: Producers Bank of the Philippines was insured by the Fortune Insurance and Surety Co. Inc. and an insurance policy was issued. An armored car of Producers, while in the process of transferring cash in the sum of P725,000.00 under the custody of its teller, Maribeth Alampay, from its Pasay Branch to its Head Office at 8737 Paseo de Roxas, Makati, Metro Manila on 29 June 1987, was robbed of the said cash. The robbery took place while the armored car was traveling along Taft Avenue in Pasay City. The said armored car was driven by Benjamin Magalong y de Vera, escorted by Security Guard Saturnino Atiga y Rosete. Driver Magalong was assigned by PRC Management Systems with Producers by virtue of an Agreement executed on 7 August 1983. The Security Guard Atiga was assigned by Unicorn Security Services, Inc. with Producers by virtue of a contract of Security Service executed on 25 October 1982. After an investigation conducted by the Pasay police authorities, the driver Magalong and guard Atiga were charged, together with Edelmer Bantigue Y Eulalio, Reynaldo Aquino and John Doe, with violation of PD 532 (Anti-Highway Robbery Law) before the Fiscal of Pasay City. The Fiscal of Pasay City then filed an information charging the aforesaid persons with the said crime before Branch 112 of the Regional Trial Court of Pasay City. The case is still being tried as of the date of filing of the present case. Demands were made by Producers upon Fortune to pay the amount of the loss of P725,000.00, but the latter refused to pay as the loss is excluded from the coverage of the insurance policy, specifically under page 1 thereof, "General Exceptions" Section (b), and which reads as follows: "GENERAL EXCEPTIONS The company shall not be liable under this policy in respect of xxx (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction with others..." Producers opposed the contention of Fortune and contended that Atiga and Magalong are not its "officer, employee, trustee or authorized representative at the time of the robbery. On 26 April 1990, the trial court rendered its decision in favor of Producers. It ordered Fortune to pay Producers the net amount of P540,000.00 as liability under Policy 0207 (as mitigated by the P40,000.00 special clause deduction and by the recovered sum of P145,000.00), with interest thereon at the legal rate, until fully paid; the sum of P30,000.00 as and for attorney's fees; and to pay the costs of suit. Fortune appealed this decision to the Court of Appeals (CA-GR CV 32946). In its decision promulgated on 3 May 1994, it affirmed in toto the appealed decision. On 20 June 1994, Fortune filed the petition for review on certiorari. Issue: Whether Fortune is liable under the Money, Security, and Payroll Robbery policy it issued to the issued to Producers or whether recovery thereunder is precluded under the general exceptions clause thereof. Held: It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is a form of casualty insurance. Section 174 of the Insurance Code provides that "Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law

or custom are considered as falling exclusively within the scope of insurance such as fire or marine. It includes, but is not limited to, employer's liability insurance, public liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance." Except with respect to compulsory motor vehicle liability insurance, the Insurance Code contains no other provisions applicable to casualty insurance or to robbery insurance in particular. These contracts are, therefore, governed by the general provisions applicable to all types of insurance. Outside of these, the rights and obligations of the parties must be determined by the terms of their contract, taking into consideration its purpose and always in accordance with the general principles of insurance law. It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud the insurer the moral hazard is so great that insurers have found it necessary to fill up their policies with countless restrictions, many designed to reduce this hazard. Seldom does the insurer assume the risk of all losses due to the hazards insured against." Persons frequently excluded under such provisions are those in the insured's service and employment. The purpose of the exception is to guard against liability should the theft be committed by one having unrestricted access to the property." In such cases, the terms specifying the excluded classes are to be given their meaning as understood in common speech. The terms "service" and "employment" are generally associated with the idea of selection, control, and compensation. A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the insurer, or it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from non-compliance with its obligation. It goes without saying then that if the terms of the contract are clear and unambiguous, there is no room construction and such terms cannot be enlarged or diminished by judicial construction. An insurance contract is a contract of indemnity upon the terms and conditions specified therein. It is settled that the terms of the policy constitute the measure of the insurer's liability. In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. Insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted access to Producers' money or payroll. When it used then the term "employee," it must have had in mind any person who qualifies as such as generally and universally understood, or jurisprudentially established in the light of the four standards in the determination of the employer-employee relationship, or as statutorily declared even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as employees of the party employing them and not of the party who supplied them to the employer. Still, howsoever viewed, Producers entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would carry the money; and Atiga to provide the needed security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the three acted as agents of Producers. A "representative" is defined as one who represents or stands in the place of another; one who represents others or another in a special capacity, as an agent, and is interchangeable with "agent." In view of the

foregoing, Fortune is exempt from liability under the general exceptions clause of the insurance policy.

Sunlife Assurance Company of Canada vs. Court of Appeals [GR 105135, 22 June 1995] Facts: On 15 April 1986, Robert John B. Bacani procured a life insurance contract for himself from Sunlife Assurance Company of Canada. He was issued Policy 3-903-766X valued P100,000.00, with double indemnity in case of accidental death. The designated beneficiary was his mother, Bernarda Bacani. On 26 June 1987, the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife conducted an investigation and its findings prompted it to reject the claim. In its letter, Sunlife informed Bacani, that the insured did not disclosed material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter. Sunlife claimed that the insured gave false statements in his application when he answered the following questions: "5. Within the past 5 years have you: a) consulted any doctor or other health practitioner? b) submitted to: ECG? X-rays? blood tests? other tests? c) attended or been admitted to any hospital or other medical facility? 6. Have you ever had or sought advice for: xxx b) urine, kidney or bladder disorder?" The deceased answered questions No. 5(a) in the affirmative but limited his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for cough and flu complications. The other questions were answered in the negative. Sunlife discovered that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests. On 17 November 1988, Bernarda Bacani and her husband, respondent Rolando Bacani, filed an action for specific performance against Sunlife with the Regional Trial Court, Branch 191, Valenzuela, Metro Manila. Sunlife filed its answer with counterclaim and a list off exhibits consisting of medical records furnished by the Lung Center of the Philippines. On 14 January 1990, Bacani filed a "Proposed Stipulation with Prayer for Summary Judgment" where they manifested that they "have no evidence to refute the documentary evidence of concealment/misrepresentation by the decedent of his health condition." Sunlife filed its Request for Admissions relative to the authenticity and due execution of several documents as well as allegations regarding the health of the insured. The Bacanis failed to oppose said request or reply thereto, thereby rendering an admission of the matters alleged. Sunlife then moved for a summary judgment and the trial court decided in favor of the Bacanis, ordering Sunlife to pay the former the amount of P100,000.00 the face value of insured's Insurance Policy 3903766, and the Accidental Death Benefit in the amount of P100,000.00 and further sum of P5,000.00 in the concept of reasonable attorney's fees and the costs of the suit. Sunlife's counterclaim was dismissed. Sunlife appealed to the Court of Appeals, which affirmed the decision of the trial court. Sunlife's motion for reconsideration was denied, hence, Sunlife filed the petition for review on certiorari. Issue [1]: Whether good faith is a defense in concealment. Held [1]: NO. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his

knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section provides that "a neglect to communicate that which a party knows and ought to communicate, is called concealment." Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected Bacani's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by Sunlife in order for it to reasonably assess the risk involved in accepting the application. In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), the Court held that materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part. Issue [2]: Whether Sunlife's waiver of the medical examination of the insured debunks the materiality of the facts concealed. Held [2]: NO. The argument, that Sunlife's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. In Saturnino v. Philippine American Life Insurance Company, 7 SCRA 316 (1963), the Court held that "the waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not." Moreover, such argument would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective. Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries.

Ty v. First National Surety [GR L-16138, 29 April 1961] also Ty v. Associated Insurance; v. United Insurance; v. Philippine Surety; v. Reliance Surety; v. Far Eastern Surety [GR 13139, 13140, 13141, 13142, 13143 respectively] Facts: At different times within a period of two months prior to 24 December 1953, Diosdado C. Ty, employed as operator mechanic foreman in the Broadway Cotton Factory insured himself in 18 local insurance companies, among which being the 8 above-named defendants, which issued to him personal accident policies. Plaintiffs beneficiary was his employer, Broadway Cotton Factory, which paid the insurance premiums. On 24 December 1953, a fire broke out which totally destroyed the Broadway Cotton Factory. Fighting his way out of the factory, plaintiff was injured on the left hand by a heavy object. He was brought to the Manila Central University hospital, and after receiving first-aid, he went to the National Orthopedic Hospital for treatment of his injuries (fractures in index, middle, fourth, and fifth fingers of left hand). From 26 December 1953 to 8 February 1954, he underwent medical treatment in the hospital. The above-described physical injuries have caused temporary total disability of plaintiffs left hand. Plaintiff filed the corresponding notice of accident and notice of claim with all of the above-named defendants to recover indemnity. Defendants rejected plaintiffs claim for indemnity for the reason that there being no severance of amputation of the left hand, the disability suffered by him was not covered by his policy. Plaintiff sued the defendants in the Municipality Court of this City, which dismissed his complaints. Thereafter, the plaintiff appealed to the CFI Manila, presided by Judge Gregorio S. Narvasa, which absolved the defendants from the complaints. Hence, the appeal. The Supreme Court affirmed the appealed decision, with costs against the plaintiffappellant. 1. Agreement in insurance policies is the law between the parties; Stipulations clear The agreement contained in the insurance policies is the law between the parties. As the terms of the policies are clear, express and specific that only amputation of the left hand should be considered as a loss thereof, an interpretation that would include the mere fracture or other temporary disability not covered by the policies would certainly be unwarranted. In the case at bar, due to the clarity of the stipulation, distinction between temporary disability and total disability need not be made in relation to ones occupation means that the condition of the insurance is such that common prudence requires him to desist from transacting his business or renders him incapable of working (46 C.J.S., 970). 2. Court cannot go beyond express condition of insurance policies While the Court sympathizes with the plaintiff or his employer, for whose benefit the policies were issued, it can not go beyond the clear and express conditions of the insurance policies, all of which define partial disability as loss of either hand by a amputation through the bones of the wrist. There was no such amputation in the case at bar.